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Panic over financial doomsday is overdone, expert says

Rather than waiting for the sky to fall, investors should consider their portfolios in a long term context

deVere's Green sees potential through the economic gloom
Spooked investors should avoid being 'doomsday preppers’, according to deVere

Talk of a financial apocalypse goes too far, according to deVere Group, an independent financial advisor with US$10bn under management.

Nigel Green, deVere’s chief executive, says spooked investors should avoid having a similar mind-set of a ‘doomsday prepper’ – generally someone with an 'end of the world' plan.

Rather than waiting for the sky to fall investors should consider their portfolios in a long term context, according to Green.

“For most long term investors, fears of a near-term financial apocalypse are overdone,” he says.

“They should,” he continued, “concentrate instead on investing for the longer-term and ensuring that their portfolios are well diversified.

“Failure to diversify a portfolio is widely regarded as one of the most common investment pitfalls – and history teaches us that diversification in these times of rising market volatility is even more essential.”

There are many factors contributing to the global economic slowdown that most investors currently worry about; including - but not limited to - weak commodity prices and worse than expected demand from China.

Another is a growing anticipation of rising interest rates in the UK and America.

The most recent tremor to shake investor confidence is the so-called ‘currency war’ sparked by China’s devaluation of the yuan. The fear is that everyone else will follow suit, to remain competitive in key export markets, and the result will be the downward spiral of money devaluation.

China’s Yuan hit four-year lows this month amid volatility that was further exacerbated by weak data - the People’s Republic will see industrial growth in the order of 6%.

Analysts claim a global currency war could curb world growth prospects.

“China is cooling off at an alarming rate leaving traders terrified as panic selling becomes widespread,” said IG Market’s David Madden.

At the same time, Green reckons there’s still potential for the Chinese economy to actually drive stocks higher again, albeit in time.

“China may yet be a positive theme for investors next year,” he said.

“China’s devaluation will make their exports cheaper and this will help its fragile economy recover. 

“Also, as I have seen on recent trips to China, consumption in China’s powerhouse cities is buoyant, which is good news for global businesses wanting to take advantage.”

This isn’t the only reason to be investing he reckons, as he believes the Euro is currently undervalued and US rate risers could come later than anticipated.

“This will help boost a Eurozone recovery; I believe any US rate rise will be later than most expect and smaller; and oil prices are very low and, again, this will contribute to more global growth” he said.

Naturally though, Green measures this tentative positivity with a caveat, which basically amounts to investors much keep their nerve.

“Until this good news starts to challenge the current market nervousness, investors are advised to sit still and ensure their portfolios are well-diversified.”

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